Why Century City Ranks Among the Worst Real Estate Deals in Hollywood History
Fifty years ago, the ribbon was cut on the Gateway West Building, the culmination of a Hail Mary plan by 20th Century Fox to cover "Cleopatra's" runaway budget by selling its 260-acre backlot for $50 million -- land that's worth billions today.
Herrscher and Skouras had a fraught relationship, their intertwining of personal and professional allegiances at times combustible. Herrscher repeatedly would attempt to renegotiate his salary and make plays for stock-option payouts, which were in turn rebuffed by Skouras, who was concerned that the Fox board would cry nepotism. (Indeed, Herrscher wasn't above using the familial connection to his advantage; he once sent a note that both wished Skouras' wife a speedy recovery from surgery and asked for a raise.)
Meanwhile, Skouras bedeviled Herrscher, too. There were the mogul's late-career bouts with legacy vanity. (In time, Skouras -- perhaps fueled by his ingratiating nephew-in-law's habit of referring to the skyscraping plan as "this great project that you are the head of" -- began to believe he alone had come up with the initial idea and apparently briefly entertained the idea of calling it Skouras City.)
There also was Skouras' itchy impatience for a quick payout, particularly as the budget began to balloon on that historical epic starring Elizabeth Taylor. As Herrscher later would privately seethe, "Cash for Cleopatra was his obsession."
So even though the director of property development was, after years of effort, able to arrange for his insurance company consortium to loan the studio enough money to develop the project, Skouras finally scuttled that approach. Instead, the mogul sought out cash bidders on his own, finally settling on Manhattan real estate czar William Zeckendorf (the two happened to both have homes on the Long Island Sound), who began negotiations by wryly observing, "Whatever you suggest, I'll tell you that your price is too high."
For his part, Herrscher repeatedly told Skouras he was against the Zeckendorf deal, explaining, "We could raise enough money to give you this $50 million" needed for the studio to finance the project itself. But Skouras refused to borrow. "I lost my fortune in St. Louis in 1929 after the stock market break," the mogul said, "and I owed $3 million, and I had to work for years, between my brothers and myself, to pay this back, and I don't want to owe any money."
Replied Herrscher, bewildered: "That's all you do in the motion picture business. You owe money to banks because you haven't got enough money in hand to make all these pictures." Skouras -- who would be ousted from Fox in 1962 in favor of Zanuck because of a shareholder revolt precipitated by Cleopatra's financial excess -- waved him off. "Well," he said, "that's motion picture business. That's not real estate business."
The protracted negotiations between Skouras and Zeckendorf led to much skepticism in the press about whether the project would ever get off the ground. Even its name became a wry punch line among real estate insiders who joked it would take a century for the plan to be completed, since the funding required to seal the deal never seemed to materialize.
So in May 1959 the studio decided to do what came naturally: It put on a production, gathering a crowd of 100 on Fox's fake Old West street for a groundbreaking to trumpet its real-life city of the future. Skouras and his still-uncommitted property buyer presided over the stalling-for-time announcement, making light of their public slow dance. "Here is a Jew, Zeckendorf, who has come to out-trade a Greek," said Skouras in his gravelly voiced, famously accented English. (Bob Hope liked to tease him that he'd immigrated decades earlier "but still sounds as if he's coming next week.") Zeckendorf had his own view of the deal, mid-haggle: "I am flattered, flattered by Mr. Skouras' remarks on my astuteness of how I am stealing his property -- if and when I sign the contract, which yet remains unsigned."
Along the block of ersatz commercial fronts, a small wooden shack had been erected just for the occasion of being knocked down. Los Angeles Mayor Norris Poulson had the honor of bulldozing it -- almost hitting Mary Pickford in the process. At a celebratory luncheon in the studio commissary that followed, Zeckendorf asked attendee Joan Crawford whether she'd heard about a movie museum planned for the development. "Know about it?" the actress said. "I'm part of it!"
It would be nearly two more years until Zeckendorf, the leverage developer, found his own big-daddy financial partner in Pittsburgh-based Alcoa. The deal finally got done for the raw land (at a mere $43 million between the two) and building commenced. The studio retained an 80-acre footprint, leasing its reduced geography for $1.5 million per year in rent. By the time the inaugural Gateway West building was dedicated on Sept. 25, 1963, the aluminum giant had taken full control. (Zeckendorf, at long last overleveraged, would file for bankruptcy in 1965.)
Becket's master plan eventually would morph into its current configuration, with noted modernist architects I.M. Pei, Charles Luckman and Minoru Yamasaki each designing towers. The Arabian Nights hotel apparition -- which happened to be Zeckendorf's idea -- became the sleek Century Plaza hotel, and the film icons' statues along Avenue of the Stars were discarded by Alcoa execs in favor of a space age scheme (Constellation Boulevard, anyone?). "The Pittsburgh people," noted Herrscher, "didn't like the suggestion of theater romance." What the Pittsburgh people unsurprisingly did like was the idea of putting aluminum panels just about everywhere. On an aesthetic level, they saw the Century City skyline most crucially as a high-profile canvas for what Alcoa CEO Frank Magee deemed "an even greater future" for its line of curtain walls.
Herrscher permanently was sidelined and made irrelevant once Alcoa entered the picture. It would be his last big play. He remained insistent to the end of his life, however, that Fox needn't have sold its backlot to develop it. Herrscher believed that Skouras tragically had given away a studio asset comparable to "finding uranium or gold in your own backyard" -- which he predicted exponentially would increase in value in the decades to come -- for a relatively modest, immediate short-term windfall that would help Skouras buttress his Cleopatra cash crunch.
And Herrscher was right: A 2.4-acre plot of prime undeveloped Century City land sold in 2010 for $59 million, just as the real estate market was rebounding. That puts the current valuation of those raw 260 acres at a minimum of $6.4 billion. Skouras' $43 million 1961 payday translates to $336 million today. For what it's worth.
Additional reporting by Adam Zientek. This story is primarily based on archived material from the personal papers of Edmond Herrscher (at UCLA) and Spyros Skouras (at Stanford).